Web Kiosks Lure Indian Farmers as Retailers Target Rural Market

Wednesday, May 16, 2007

Chander Singh and six other farmers huddle around a computer in the village of Bhaukhedi watching soybean prices rise. While the nearest road is a kilometer away, a portable satellite receiver connects them to the Internet.

Singh tripled his income over the past six years by selling beans to ITC Ltd., a 96-year-old tobacco and food company that has built a network of computers to provide information to farmers and convince them to buy the company’s products. Growers who use the service say they receive higher crop prices, cheaper pesticides and scented hair oil that keeps their wives happy.

Indian retailers are teaching farmers how to plant crops and fight pests to win rural customers as the country’s economic boom spreads to the countryside. Consumer spending in small towns and villages across the country is forecast to rise 60 percent to 740.2 billion rupees ($18.1 billion) by 2012, according to the Associated Chambers of Commerce and Industry of India.

Rural productivity has increased since 2003, when the government allowed farmers to sell crops directly to wholesalers and abolished state-run monopolies that paid fixed prices to ensure affordable food supplies.

Higher incomes are attracting supermarkets, which are challenging small merchants who have traditionally sold a narrow range of mostly locally made goods. Reliance Industries Ltd., India’s biggest non-state company, and four other firms plan to build 2,900 rural stores in the next five years.

e-Choupal

“The landscape of villages is changing,’’ says K.G. Kshirsagar, an economist at the Gokhale Institute of Politics and Economics in Pune, Maharashtra state. “There are a lot more two- wheelers and cars. Mobile phones are becoming common.’’

To tap into that growth, ITC is building a national crop procurement network of 6,500 “e-Choupal,’’ kiosks named after the Hindi word for village meeting place. Farmers sell their crops online, then deliver the produce to supermarkets where they can buy everything from cookies to pesticides.

The kiosks also provide smallholders with an alternative to grain markets where farmers sell to government agencies and corporate buyers such as Cargill Inc., the largest U.S. agriculture company.

’Better prices’

“It takes me the whole day at the grain market,’’ complains Shriram Kedia, 75, as he buys sugar, cooking oil and toys for his grandchildren after delivering soybeans to ITC’s buying center. “Here it takes about an hour. I get better prices and I am not cheated in the weight of my produce.’’

Women buy individual sachets of jasmine-scented hair oil at the ITC center, allowing them to avoid the local man who dispenses his product from drums strung off a bicycle.

Shopkeeper Dharmendra Kesari says he’s being forced to respond to threats from corporate retailers. While his 80-square- foot shop still stocks sacks of loose tea and wheat, he now sells expensive branded shampoos and cookies.

“People are demanding products they see on television,’’ he says.

Lingering Poverty

For now, Bhaukhedi’s prosperity isn’t typical of rural India, which suffers from poverty and rising suicide rates among heavily indebted farmers. Farm production increased an average of 2.3 percent annually over the past five years compared with 8.8 percent for industrial production and 9.3 percent for services.

Productivity is low because 60 percent of plots are smaller than 1 hectare (2.5 acres) and 40 percent lack irrigation, according to the National Commission on Farmers. Poor roads, limited telephone services and a lack of power in more than 100,000 villages also constrain growth.

“The single biggest obstacle is electricity,’’ says S. Sivakumar, who heads ITC’s agriculture arm. “For people to access the Internet, the access to the computer has to be reliable.’’

Prime Minister Manmohan Singh wants to boost farmers prospects by spending 1.76 trillion rupees between 2004 and 2009 to build roads, provide telephones and link villages to the power grid. The government is calling on state-run banks to increase loans to farmers by 18.4 percent this year.

What farmers need to compete are affordable supplies and practical advice, says Ajay Shriram, chairman of DCM Shriram Consolidated Ltd., a fertilizer and petrochemical maker that plans to open 200 rural supermarkets by 2009.

“Until the farmer benefits and makes his extra margin, we can’t get anything out of it,’’ Shriram says.

’Moral Obligation’

The company’s strategy is on display at a rural complex 125 kilometers (78 miles) from the Indian capital, New Delhi. On a baking afternoon, 60 farmers crowd into a DCM Shriram warehouse to hear a lecture on potato growing methods before heading to the adjoining supermarket to check out the latest goods.

“Once you benefit from their advice it becomes our moral obligation to purchase goods from their store,’’ says Prem Sagar, who grows mustard, potatoes and wheat on his 48 acres.

By providing advice to farmers, companies are helping them produce more with less, says A.N.S. Raghu, Madhya Pradesh state’s deputy director of agriculture. Soybean production in the state’s Sehore district rose to 339,750 tons last year from 265,400 tons six years earlier as the amount of fertilizer used per hectare fell 25 percent.

“Farmers are using the Internet to get more information, improving yields, cutting consumption of inputs and ensuring higher prices for their produce,’’ Raghu says.